the new purchasing system review - national … · the new purchasing system review ... overview of...

The New Purchasing System Review

Presented by

J.A. White & Associates, Inc.

Date 17 October 2012

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We’re drowning in information and starving for knowledge.

-Rutherford D. Rodgers

(c) J.A. White & Associates, Inc. October 2012

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Goal of This Session

You

Our Session

Me Our Workshop

Course Materials

For “Desktop” Use


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Topics

This Presentation Will Discuss:

Contractor Purchasing System Reviews (CPSR)

New CPSR Guidelines issued by DCMA

New Subcontract file documentation requirements

How to prepare today for a Government review tomorrow

Compliance with Public Laws, FAR and DFARS flow-down

How to obtain Reps and Certs from your subcontractors

Cost and Price Analysis of subcontract proposals

Documenting negotiations with suppliers


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Reference Materials

FAR Parts 2, 15, 44, and 52


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Unit 1 Topic

Overview of Subcontracting

Overview of Contractors Purchasing System Review


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Contractual Relationships

Subcontract/Purchase Order establishes relationship between prime and subcontractor

Protects the rights of primes and the Government


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FAR ApplicabilityFAR speaks to contracting officers first, then to contractors – mainly from the Government’s point of view.

Rarely does it speak to contractors relative to subcontracting guidance.


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Contractual Relationships

Subcontract Management tools used in Risk Management: Advance Notification/Consent Debarment Process Small Business Subcontracting Programs Flow-downs Contractors Purchasing System Review

(CPSR)


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Risk Management Tools

Prime Contract Statement of Work

Clauses

Subcontract Process RFP

SOW

Selection of Subcontract Type

Clauses (Truth In Negotiations Act/Cost Accounting Standards)


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What is a CPSR?

An enterprise-wide audit that: Measures how efficiently and

effectively a contractor spends Government funds and;

Evaluates compliance with Government Subcontracting policies, regulations and laws.


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CPSR – The Customer’s Review

Contractor’s Government Business Volume Exceeds $25 Million (Excluding Competitive FFP, Competitive FFP/EPA Contracts and Commercial Item Acquisitions)

Whenever an Administrative Contracting Officer or Procuring Contracting Officer specifies


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CPSR – The Customer’s Review

The CPSR ultimately provides the Administrative Contracting Officer with the insight required to determine if a contractor’s purchasing system approval should be granted, withheld or withdrawn.


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Contract Business System Rules

Requirements of contractor business systems only apply to new contracts containing the DFAR Clauses (252.244-7001 and 252.242-7005)

These clauses became effective on May 2011

DFARS 242.242-7005, which empowers the Government to withhold payments, only apply to contracts that are also subject to CAS

The final rules implementing this requirement states that contractor business systems are indicative of contractor responsibility and can be used to discern eligibility for contract awards.

The 5 percent withholding is not the only remedy available to DoD.

DCAA's assessments of contractor business systems aren't necessarily final.

Contractors are allowed to challenge assessments of their business systems.


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Scope of CPSR

Procurement Responsibility

Certifications

Sourcing and Pricing

Negotiations

Vendor Rating System

Defense Priorities Allocation System (DPAS)

Requisition Process

Reps and Certs

Flow downs


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CPSR Risk Assessment: Basis for Selection

CPSR Approval HistoryIdentified by PCO or ACOIncreased Sales to GovernmentGrowthPre-Award SurveysMajor Programs/High VisibilityOther AuditsSelf Assessment Activities


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CPSR: Identification of Risk Factors

Signs of a Weak Purchasing System Identified During Self Assessments: Inadequate Procurement Lead Time Violation of Public Laws No or Poorly Written or Implemented Policies No or Weak File Documentation Lack of Upper Management Commitment to

Compliance with Procurement Regulations


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Opportunities for Success or Failure

98% of firms will not pass their initial CPSR


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Impact of an Unsuccessful CPSR on Contractors:Losing The Competitive Marketing Advantage and

Cash Flow Impact

Source Selection Implications

Past Performance Implications

Losing a Competitive Proposal

Loss of Revenue

Withhold of Payments


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Impact of an Unsuccessful CPSR on Contractors:Long-Term External Compliance Oversight Impact

Defense Contract Audit Agency or Inspector General’s (and Other Audit Agencies) Alerted

Other Audits Will Follow

Possible Negative Press


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Impact of an Unsuccessful CPSR on Contractors:Procedural Burdens with Project Management Impact

Increase Administrative Contracting Officer Surveillance Delay in Placing OrdersIncrease Administrative ExpensesDelayed Billings and Collections


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Impact of an Unsuccessful CPSR on Contractors:Costly Internal Compliance Impact

Implement Corrective Actions

Change Processes

Change Culture

Implement Training Program

Prepare for Follow-Up Audit


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Impact of an Unsuccessful CPSR on the Government:

Administrative/Procedural Burden

Review and Approve Corrective Action Plan

Review Subcontracts

Initiate Additional Audits

Conduct Follow-up Review


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CPSR Audit Team

2 analysts from Defense Contract Management Agency (DCMA) 2 weeks on siteOther analysts from DCMA and Defense Contract Audit Agency (DCAA) will review other functions - Engineering Property Small Business Inventory Control/Receiving, Inspection/QA Accounting Estimating

ACO Participates in the Review Reviews are presented to in internal Board


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Unit 2 Topic

Source Selection Documentation


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The Source Selection “T”

Sourcing Factors Pricing Factors

Competitive Sourcing Competitive Pricing

Single Sourcing Competitive Pricing or Price Analysis

Sole Sourcing Price Analysis or Competitive Pricing


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Non-competitive Source Justification

Required in accordance with: FAR 52.244-5 “The Contractor shall select

subcontractors (including suppliers) on a competitive basis to the maximum practical extent consistent with the objectives and requirements of the contract.”

Must be signed and dated by requestor prior to award


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Non-Competitive Source Justification

Typical conditions where by single and sole source buys are justified include:

– Only One Responsible Source – Unusual and Compelling Urgency– Industrial Mobilization (R&D, etc.)– Customer Directed– National Security– Public Interest– Management Directed– Economically Justified (Cost to qualify new

source outweigh savings)– Follow-on Procurement


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Team Sourcing Documentation

Document the Team Source Selection DecisionFocus on Team

Competitiveness

Document Sole Source Team Members


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Bridging the Documentation Gap

Source Justifications

Proposal Analyses

Negotiations


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Unit 3 Topic

Price Analysis


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Why Perform Proposal Analyses?

Contracting Officers (buyer) shall purchase supplies and services from responsible sources at fair and reasonable prices (FAR 15.403).Price and/or cost analyses are used to assist in the determination of the fair and reasonableness of prices and costs.


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Price Analysis

Price Analysis is the process of examining/evaluating a price without evaluating its separate cost elements and proposed profit.

Price Analysis shall be used when cost or pricing data are not required.


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Comparisons in Price Analysis

Should-pay price is the price that you would expect to pay.

Comparability is the quality or state of being comparable


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Price Analysis- Comparison Process

Identify Factors that Effect Comparability

Determine Effect of Identified Factors

Adjust Prices for Comparison

Compare Offered Prices with Adjusted Prices

Select Price for Comparison

Prices for Comparison•Other Proposed Prices

•Commercial Prices

•Previously-Proposed Prices, Subcontract Prices

•Parametric Estimates

•Independent Estimates

Quantitative Techniques to Adjust Prices

•Index Numbers

•Trend Analysis

•Price-Volume Analysis

•Graphic Analysis

•Learning Curve


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Information sources

Conduct Market Research

Market Research Tools: Internet

Industry/Government Publications

Industry Contacts

Trade Shows

GSA


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Price Analysis Documentation

Background/Situation

Analysis

Explanation/Discussion of Method of Analysis/

Basis of Award

Conclusion

Signature/Date

Attachments as Required


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Price Analysis: Documentation Concepts

• Some form of price analysis in all orders

• Amount of detail in the analysis is relative to the dollar value

• complexity and

• circumstances

• SCA/Buyer knowledge is not acceptable

• Include previous Price Analysis and other objective evidence, as required


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Unit 4 Topic

File Documentation


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Procurement Process Timeline

AC

O/P

CO

C

onse

nt

Neg

otia

tion

s

Pri

ce A

naly

sis

&Te

ch E

valu

atio

n

Pro

posa

l /Q

uote

RFP

/RFQ

/RFI

Sour

ce

Just

ific

atio

n

PR

Deb

arm

ent

Ver

ific

atio

n

Cer

tifi

cati

ons

PO

/Sub

K


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Multi-year Subcontracts

The Contractor must consider the total potential value of a subcontract when documenting a multi-year subcontract

Total potential value includes:

Subcontract ceiling amount

Current funding amount

All Options (price and unpriced)


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Split awards

Avoid splitting awards to circumvent FAR requirements

If it can not be avoided, use sound judgment when deciding whether to split awards.

Document the decision to split awards.


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Documentation TipsProvide the proper title to a document Example 1: “Source Justification” not

“Justification for Other than Full and Open Competition”

Example 2: “Price Analysis” not “Price/Cost Analysis”

Example 3: “Source Justification” not “Single/Sole Source Justification”

Example 4: “Price Analysis” not “Price Justification”


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General Documentation Issues

All documents…Memos to file, price analysis,

procurement summaries, source justifications, etc

Must be…

properly signed, dated, and contain clear and concise information.

Must Tell The Story!


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For Additional Information

Jeffery A. White, C.P.M., PresidentJ.A. White & Associates, Inc.1341 Garner Lane, Suite 104Columbia, SC 29210803.407.1399 803.407.0256 (fax)[email protected]

Jeff Rankin, Vice President of OperationsJ.A. White & Associates, Inc.5335 Wisconsin Ave. N.W.Suite 440Washington, DC 20015202-243-0575 (office DC)301-293-2197 (office MD)202-531-3179 (mobile)[email protected]

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